2025 CLFP Recertification

Dodd-Frank 1071 – Where are we?

In May 2024, the U.S. Supreme Court upheld the constitutionality of the Consumer Financial Protection Bureau (CFPB) funding structure, ending the nationwide injunction staying the implementation of Dodd-Frank Section 1071. The CFPB has extended compliance dates by 290 days to compensate for the injunction with the new compliance dates as follows:

As of the implementation dates noted above, all covered financial institutions, defined broadly to include any entity that conducts commercial finance activity, will be required to collect specific data and report to the CFPB annually on all small business applications for credit. (Small business is defined as $5 million or less in gross annual revenue for its preceding fiscal year).

Some key steps in preparation for implementation of Dodd-Frank 1071:

• Identify covered credit transactions and applications.
• Identify data points needed for reporting and ensure they are captured.
• Review systems and applications to identify system enhancements needed prior to implementation.
• Document procedures and process flows.
• Provide adequate training for employees and third parties.
• Managing data from third-party loan originators to ensure completeness and accuracy as well as compliance with requirements.
• Separation firewall for demographic data.
• Data cleanup, review, and reporting.
• Data retention requirements.

Remain up to date by visiting Small Business lending rulemaking | Consumer Financial Protection Bureau (consumerfinance.gov)

Enhanced Finance State Disclosure Laws – Where are we?

State legislators are continuing to introduce consumer-like enhanced finance disclosure requirements for commercial transactions. The primary objective of these proposed regulations is to mandate commercial financing entities furnish transparent and uniform disclosures primarily aimed at safeguarding the interests of small business owners.

The Equipment Leasing and Finance Association (ELFA) has been at the forefront of advocating for exemptions within this ever-evolving state regulatory landscape. Notably, the ELFA has successfully secured exemptions for all equipment true leases in California and New York, as well as comprehensive exemptions in every state that has enacted or proposed disclosure legislation since New York. These exemptions encompass various financing arrangements, including but not limited to, UCC 2A true leases and UCC 9 purchase money obligations.

Currently, among the states that have passed enhanced disclosure legislation, some, such as California, New York, and Connecticut, mandate the disclosure of the annual percentage rate (APR), whereas others, such as Utah, Georgia, Florida, and Virginia, do not. Additionally, disclosure requirements typically include detailing the finance charge, payment schedule, and any third-party agreements involved in the loan.

In summary, the movement towards enhanced finance disclosure underscores a concerted effort by states to promote transparency and protect the interests of small business borrowers. The ELFA’s proactive engagement in securing exemptions demonstrates a commitment to balance state regulatory requirements with the needs of the commercial equipment leasing and finance sector. As more states consider similar enhanced disclosure laws, collaboration between industry stakeholders and policymakers remains crucial to crafting regulations that foster economic growth while ensuring fair and transparent lending practices.
Remain up to date by visiting Lender License and Enhanced Financial Disclosure (elfaonline.org)